Deese on recession fears: People ‘underestimating’ economy’s strengths

National Economic Council Director Brian Deese on Sunday downplayed some economists’ fears of an impending recession, arguing the economy can persevere through ongoing interest rate hikes that aim to curb rising prices.

Speaking with Margaret Brennan on CBS’s “Face the Nation,” Deese instead described the economy as in a state of “transition” after President Biden said on Thursday a recession was “not inevitable.” 

Deese pointed to increased household savings and low proportions of people missing payments on mortgages and credit cards.

“Not only is a recession not inevitable, but I think that a lot of people are underestimating those strengths and the resilience of the American economy,” Deese said.

After the Federal Reserve signaled for months that it would only hike interest rates by 0.5 percentage points in June, the central bank announced last week it would hike its baseline interest rate range by 0.75 percentage points, the largest singular increase since 1994.

Fed leaders upped the increase following a May inflation surge and rising consumer expectations of future high inflation. 

The increase makes borrowing more expensive, including mortgage costs and credit card debt, which cools off demand in the economy.

The Fed is seeking a “soft landing” in which those moves stabilize prices without causing a major economic slowdown, but some economists have meanwhile warned of an impending recession.

Some are raising alarm over challenges outside the Fed’s control, including supply-side bottlenecks exacerbated by Russia’s invasion of Ukraine. Stocks whipsawed last week, and the S&P 500 index saw its worst weekly loss since March 2020.

“We face unprecedented global circumstances, a global pandemic and a war in Europe that is affecting the global economy,” Deese said on Sunday. “But at the same time, we have a strategy that will make a difference.”

A survey published last week found that more than 60 percent of CEOs around the world said they expect a recession before the end of 2023.

Deese on Sunday argued CEOs are planning around an economic “transition” in which people are shifting their spending from goods to services, acknowledging that the shift has caused “real challenges” for some companies.

“We have been through delta and omicron,” he said. “We’ve had a war in Europe and all of the impacts that that has had, and through it, the American economy has remained resilient. What we want to focus on now is taking every step we can to continue that progress.”